Interim Results
SIG PLC
31 August 2000
INTERIM RESULTS FOR THE SIX-MONTHS ENDED 30 JUNE 2000
SIG plc, Europe's largest specialist distributor of insulation and related
products, today reports record interim results with sales and operating profit
ahead in all its main businesses.
* Group sales increased 12% to £447m (1999: £399m)
* Operating profits before amortisation of goodwill up 17% at £23.3m (1999:
£19.8m)
* Profit before tax was up by 15% to £21.6m (1999: £18.7m)
* Earnings per share rose by 16% to 12.4p (1999: 10.7 p)
* Interim dividend of 3.4p (1999: 3.1p) declared, an increase of 10%
* Continued recovery in Germany
* Market share gained in all principal markets
* Five small bolt-on acquisitions made in the period
Barrie Cottingham, Chairman of SIG, commenting on the results and group
prospects, said: 'Our performance in the first half has demonstrated once
again our capacity to grow in challenging markets. Trading since June has been
encouraging and we are confident that the Group will continue to make progress
in the second half of 2000 and beyond.'
Enquiries:
Bill Forrester, Chief Executive, SIG plc today 020 7251 3801
Frank Prust, Finance Director, SIG plc thereafter 0114 285 6300
Rupert Younger/ Faeth Finnemore, Finsbury 020 7251 3801
Chairman's Statement
Good progress has been made in the first half of 2000 and profits and earnings
have grown substantially. Increased sales and operating margin improvements
have produced good organic growth in all our strategic businesses. Continued
improvement in performance in Germany has been complemented by further
progress in the UK and France and, despite challenging conditions, we believe
that we have consolidated our position as leader in these markets.
Results and Dividends
* Sales in the first half have increased by 12% to £447m (1999: £399m)
* Operating profits before amortisation of goodwill for the period are 17%
higher at £23.3m (1999: £19.8m) despite an adverse effect on currency
translation of £0.4m
* Earnings per share for the half year are 16% higher at 12.4p compared
with 10.7p in 1999
* The balance sheet remains sound with gearing at 49% compared with 42% at
December 1999 and interest cover at more than 20 times.
An interim dividend of 3.4p (1999: 3.1p) has been declared, an increase of
10%, reflecting the Group's strong performance and the Board's confidence in
the future. The dividend is payable on 17 November 2000 to shareholders on
the register at 27 October 2000.
UK
Sales increased in all our UK distribution activities and, in a market which
grew only very modestly, we believe that we have strengthened our position in
our main sectors. Operating profit increased by 17%, gross margins were
maintained and operating profit margins improved.
In insulation and related products, markets remained subdued and volume growth
was offset by product price deflation, albeit at a slower rate than last year.
Against this background, Sheffield Insulations and Warren Insulation performed
well, producing good growth in sales and profits. We are also pleased to
report that Kitsons Insulation Products, acquired in 1998, improved
substantially and made a satisfactory contribution to profits.
In a branch network which remained unchanged, we made further investment in
increased sales resources and improved our logistics capabilities, maintaining
our leadership in customer service. New product initiatives in specialist
applications made a useful contribution to sales growth.
The roofing division grew strongly, increasing market share and improving
operating margins. The branch network now numbers sixty-seven, giving
increased UK coverage. The two small in-fill acquisitions made in 1999 are
now fully integrated and contributed to profits.
Our ceilings and partitioning businesses all produced improved performance in
the period. The suspended ceilings market continued to suffer price
deflation, although at a slower rate than prior year. Despite this, CP
Supplies and Ceilings Distribution increased both sales and profits,
benefiting from investment in marketing and sales resources and new locations
in Birmingham and Dublin. New administration and computing systems have been
introduced to improve internal efficiencies.
The demand for new and up-graded office interiors has enabled Komfort Systems,
our specialist partitioning business, to produce an excellent performance.
Sales growth in higher specification products and greater penetration of the
upper quartile of the market has led to a substantial improvement in profits.
We believe that we have continued to gain market share, as a result of
increased expenditure in specification sales and design and marketing.
Strong sales growth in hand, body and respiratory protection products produced
good profit growth in Safety Distribution, our specialist distributor of
personal protective equipment.
Europe
In Germany, the market for construction materials, including our main product
sectors, has remained weak. Conditions in the west have been modestly
positive but in the east demand has, once again, fallen significantly. We
believe that, overall, our markets declined by approximately 2% by value. We
are pleased, therefore, to report that our businesses, WKT and Golinski, have
continued the recovery of last year and produced substantial growth in
operating profits. In local currency, sales have grown and margins have
improved, reflecting the success of management action on efficiency and
productivity. Good progress has been made in the development of our position
in the ceilings and partitioning sector and we believe our industrial
insulation and dry lining divisions have gained share and out-performed the
market.
In France, sales improved significantly in local currency and excellent
progress has been made developing our ceilings and partitioning activity.
However, operating profits have been affected by increased investment in IT
and the initial cost of opening new locations and facilities in Paris,
Orleans, Nantes and Dijon. The number of ceilings and partitioning branches
in France has now increased to twelve. In insulation markets, where demand
was flat and pricing modestly deflationary, Ouest Isol increased sales and
consolidated further its market leadership.
We continued to invest in our growing distribution business in Poland and the
branch network has increased to twelve, extending our geographical coverage
and offering a full range of insulation, dry lining and suspended ceiling
products. We have seen a positive contribution for the first time despite the
costs incurred in opening new branches.
Rest of the World
Operating profits in the USA are slightly ahead of the prior year, despite
highly competitive markets and continuing weak demand in the core petro-
chemical sector. In these difficult trading conditions, Distribution
International and Branton Industries have increased sales and strengthened
their market position. BWI, our east coast based insulation and safety product
distributor, has made a sound contribution.
Acquisitions
Five small in-fill acquisitions were made during the period. The two
principal being Formerton and Nouwens. We continued our development in the UK
roofing materials distribution sector through the purchase of Formerton in
March and in April we made a strategic move into the Dutch market by acquiring
Nouwens, a specialist ceilings and partitioning company. These businesses have
strengthened our position in key market sectors and all have traded profitably
in the first half.
e-Commerce
We continue to develop our e-commerce capability. Our main business units
have fully descriptive product and service internet sites and, by the end of
2000, we will have added further fully interactive sites to the
protecdirect.co.uk site which is already operating.
Prospects
We do not anticipate significant changes in demand or product pricing across
our main markets in the second half of the year. In the UK, volume is likely
to show modest improvement and prices will remain broadly static. In Germany,
the east will continue to be difficult and we expect conditions in our market
sectors in the west to be positive in terms of demand and price stability.
Construction activity in France will continue the growth trend of the first
half of the year but the industrial sector will remain relatively weak. In
the USA, we do not expect any change in the level of demand in our core
industrial and petro-chemical markets.
Our performance in the first half has demonstrated once again our capacity to
grow organically in challenging markets. We have enhanced further our
customer service and sales capability in several of our key activities through
investment in resources and infra-structure. We are in an excellent position
to exploit opportunities and to continue to grow and develop our strengths.
Trading since June has been encouraging and we are confident that the Group
will continue to make progress in the second half of 2000 and beyond.
Summary Consolidated Profit and Loss Account
for the six months ended 30 June 2000
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
Note 2000 2000 1999 1999 1999 1999
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 3 447,344 399,352 841,304
-------------------- ------- ------- -------
Operating profit 3 22,675 19,647 44,207
Net interest payable 1,122 956 1,902
-------------------- ------- ------- -------
Profit before
taxation and
amortisation of
goodwill 22,141 18,862 42,854
Amortisation of
goodwill 588 171 549
-------------------- ------- ------- -------
Profit on ordinary
activities before
taxation 21,553 18,691 42,305
Tax on profit on
ordinary activities 6,803 5,940 13,233
-------------------- ------- ------- -------
Profit on ordinary
activities after
taxation 14,750 12,751 29,072
Minority interests
(all equity) 38 62 185
Equity dividends 3,996 3,689 11,020
-------------------- ------- ------- -------
Retained profit for
the year 10,716 9,000 17,867
-------------------- ------- ------- -------
Earnings per share
Basic earnings per
share 4 12.4p 10.7p 24.4p
Fully diluted
earnings per share 4 12.3p 10.7p 24.2p
-------------------- ------- ------- -------
Earnings per share
before goodwill
amortisation
Basic earnings per
share 4 12.9p 10.9p 24.9p
Fully diluted
earnings per share 4 12.8p 10.8p 24.7p
-------------------- ------- ------- -------
Consolidated Statement of Total Recognised Gains and Losses
for the six months ended 30 June 2000
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2000 1999 1999
£'000 £'000 £'000
Profit on ordinary activities after
taxation and minority interests 14,712 12,689 28,887
Currency translation differences on
foreign currency net investments (486) (1,432) (2,840)
----------------------------------- ------- ------- -------
Total recognised gains and losses
for the period 14,226 11,257 26,047
Prior year adjustment - (2,818) (2,716)
----------------------------------- ------- ------- -------
Total gains and losses recognised
since last annual report 14,226 8,439 23,331
----------------------------------- ------- ------- -------
Summary Consolidated Balance Sheet
as at 30 June 2000
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2000 1999 1999
£'000 £'000 £'000
Fixed assets
Intangible assets 24,288 7,343 16,035
Tangible assets 56,725 49,685 49,946
----------------------------------- ------- ------- -------
81,013 57,028 65,981
----------------------------------- ------- ------- -------
Current assets
Stocks 69,710 63,925 61,663
Debtors 188,870 170,999 155,015
Cash at bank 5,605 3,816 4,538
----------------------------------- ------- ------- -------
264,185 238,740 221,216
Creditors due within one year (184,094) (167,529) (138,448)
----------------------------------- ------- ------- -------
Net current assets 80,091 71,211 82,768
----------------------------------- ------- ------- -------
Total assets less current
liabilities 161,104 128,239 148,749
Creditors due after one year (24,737) (9,337) (22,688)
Provision for liabilities and
charges (3,632) (4,153) (3,602)
----------------------------------- ------- ------- -------
Net assets 132,735 114,749 122,459
----------------------------------- ------- ------- -------
Capital and reserves (all equity) 132,735 114,749 122,459
----------------------------------- ------- ------- -------
Summary Consolidated Cash Flow Statement
for the six months ended 30 June 2000
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2000 1999 1999
Note £'000 £'000 £'000
Net cash inflow from operating
activities 5 22,481 33,190 55,944
------------------------------ ------- ------- -------
Returns on investments and
servicing of finance (1,122) (956) (1,902)
------------------------------ ------- ------- -------
Taxation (3,562) (2,469) (15,801)
------------------------------ ------- ------- -------
Capital expenditure (8,819) (6,700) (13,081)
------------------------------ ------- ------- -------
Acquisitions (13,896) (5,932) (17,127)
------------------------------ ------- ------- -------
Equity dividends paid (7,306) (6,641) (10,306)
------------------------------ ------- ------- -------
Financing 1,026 (1,147) 11,878
------------------------------ ------- ------- -------
(Decrease)/increase in cash in
the period 6 (11,198) 9,345 9,605
------------------------------ ------- ------- -------
Notes to the Unaudited Interim Results
1. Basis of Preparation of Interim Financial Information
The accounts have been prepared in accordance with the accounting policies
included in the Annual Report for the year ended 31 December 1999, which
have been applied consistently throughout the current and preceding
periods.
2. Publication of Non Statutory Accounts
The financial information included in this interim statement does not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The interim results to 30 June 2000 and 1999 are
unaudited. The financial information for the full preceding year is based
on the statutory accounts for the financial year ended 31 December 1999.
Those accounts, upon which the auditors issued an unqualified opinion,
have been delivered to the Registrar of Companies.
3. Segmental Information
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
Geographical analysis 2000 1999 1999
£'000 £'000 £'000
Turnover
- UK 271,790 238,620 495,849
- Europe 141,226 138,461 294,608
- Rest of world 34,328 22,271 50,847
------- ------- -------
Total operations 447,344 399,352 841,304
------- ------- -------
Operating profit
- UK 19,410 16,640 36,168
- Europe 4,221 3,636 10,388
- Rest of world 924 820 801
- Parent Company (1,292) (1,278) (2,601)
- Amortisation of goodwill (588) (171) (549)
------- ------- -------
Total operations 22,675 19,647 44,207
------- ------- -------
Turnover and operating profit by destination is not materially different
from these amounts. Turnover and operating profit from acquisitions during
the period have not been reported separately due to their immateriality to
the Group results. The reporting of the activities of the Group was
restructured during the second half of 1999, with results being reported on
a geographic basis. Prior year segment information has therefore been
restated in this format.
4. Earnings per Share
The calculations of earnings per share are based on the following profits
and numbers of shares:
Basic and diluted before
Basic and diluted goodwill amortisation
Unaudited Audited Unaudited Audited
Six months Year ended Six months Year ended
ended 30 June 31 Dec ended 30 June 31 Dec
2000 1999 1999 2000 1999 1999
£'000 £'000 £'000 £'000 £'000 £'000
Profit after tax 14,750 12,751 29,072 14,750 12,751 29,072
Minority interests (38) (62) (185) (38) (62) (185)
Goodwill amortisation - - - 588 171 549
------ ------ ------ ------ ------ ------
14,712 12,689 28,887 15,300 12,860 29,436
------ ------ ------ ------ ------ ------
Weighted average number of shares:
Unaudited Audited
Six months Year ended
ended 30 June 31 Dec
2000 1999 1999
Number Number Number
For basic earnings per share 118,218,818 118,162,078 118,178,515
Exercise of share options 1,426,025 716,063 992,869
----------- ----------- -----------
For diluted earnings per share 119,644,843 118,878,141 119,171,384
----------- ----------- -----------
5. Reconciliation of Operating Profit to Net Cash Flow from Operating
Activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2000 1999 1999
£'000 £'000 £'000
Operating profit 22,675 19,647 44,207
Depreciation and amortisation 6,229 5,585 12,154
Profit on sale of tangible
fixed assets (45) (207) (364)
Changes in working capital (6,378) 8,165 (53)
-------- ------- -------
Net cash flow from operating
activities 22,481 33,190 55,944
-------- ------- -------
Notes to the Unaudited Interim Results
6. Reconciliation of Net Cash Flow to Movement in Net Debt
Unaudited Audited
Six months Year ended
ended 30 June 31 Dec
2000 1999 1999
£'000 £'000 £'000
(Decrease)/increase in cash in
the period (11,198) 9,345 9,605
Cash (inflow)/outflow from
(increase)/decrease in debt (981) 1,197 (11,801)
------- ------- -------
Changes in net debt resulting
from cash flows (12,179) 10,542 (2,196)
Acquisitions (879) - (187)
Exchange differences (1,046) 2,675 4,633
------- ------- -------
Movement in net debt in the
period (14,104) 13,217 2,250
Net debt at start of period (51,326) (53,576) (53,576)
------- ------- -------
Net debt at end of period (65,430) (40,359) (51,326)
------- ------- -------
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